The Impact Of Sales Promotion On Product Competitiveness Of Fast Moving Consumer Goods (FMCG)
This research work dealt on “The Impact of Sales Promotion on Product Competitiveness of Fast Moving Consumer Goods (FMCG).
The purpose is to examine the effects that Sales Promotional activities have on a product’s competitiveness in the market. Two hypotheses were set up in chapter one as variables for measurement and guide. Chapter one also discusses the problems to be addressed, scope and purpose of the study and operational definition of terms used.
Chapter Two reviewed existing work related to the subject matter. In this chapter, the two broad types of Sales Promotion were examined alongside the very long list of different sales promotional activities. Other topics discussed include market offering, competition, fast moving consumer goods and insight into Dansa Foods Ltd was also supplied been the case study for this research work.
The research method used for this project will be introduced in chapter three alongside the technique used for data analysis. Size of the population for this research work and the type of sampling used will also be discussed.
In chapter four, the data contained in the questionnaire(s) were analysed and subsequently explained. The questions containing the hypotheses were tested and the responses were then subjected to chi-square (X²) test at a significance level of 0.05.
Chapter five concludes this research work and also contains a summary of the findings and recommendations. The major findings include:
- Sales Promotion encourages consumers to buy more of the product on offer
- It also encourages brand switching; it is enough reasons for a large percentage of consumers to change to another brand.
Proposed recommendations are also contained in chapter five with suggestions for others planning on embarking on a similar project.
Table Of Content
- Title Page
- 1.1 Statement of the Problem
- 1.2 Relevant Research Questions
- 1.3 Statement of Hypotheses
- 1.4 Purpose and Objectives of the Study
- 1.5 Scope of the Study
- 1.6 Limitation of the Study
- 1.7 Operational definition of Terms
- 2.1 Introduction/Background to the study
- 2.2 Understanding Sales Promotion
- 2.2.1 Why Sales Promotion?
- 2.2.2 Types of Sales Promotion
- 2.3 Market Offering
- 2.4 Competition
- 2.5 Fast Moving Consumer Goods (FMCG)
- 2.6 The Fruit Juice Industry
- 2.7 Dansa Foods Ltd.
- 2.7.1 Dansa Foods and Sales Promotion
- 3.1 Introduction
- 3.2 Restatement of Research Questions and Hypotheses
- 3.3 Research Design
- 3.4 Characteristics of the Research Population
- 3.5 Sampling Design and Procedures
- 3.6 Data Collection Instrument
- 3.7 Procedures for Processing and Analysing Collected Data
Data Presentation, Analysis And Discussion
- 4.1 Questionnaire Analysis
- 4.2 Validation of Hypotheses
- 4.3 Introduction of Findings
Summary Of Findings, Conclusion And Recommendations
- 5.1 Summary of Findings
- 5.2 Conclusion
- 5.3 Recommendation
- 5.4 Suggestions for Further Studies
Sales Promotion, a key ingredient in marketing campaigns, consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade. It is a common tool used to push sales in the Fast Moving Consumer Goods (FMCG) Industry.
Sales Promotion according to Belch & Belch (2001) consists of a diverse collection of incentive tools, mostly short-term designed to stimulate quicker or greater purchase of a particular product by the consumers. It can also be seen as all promotional activities apart from personal selling, advertising and publicity which offers short term incentives designed to bend the demand curve in favour of a product through changing the habit of customers.
Whereas advertising offers reason to buy, sales promotion offers incentives to buy. It is one of the promotional tools used by manufacturers to reach target market. Sales Promotion is a necessary activity especially in a competitive market. It is not surprising therefore that sales promotion is recognised as a vital promotional tool in the marketing industry.
Sales promotion is often undertaken by an organisation to promote an increase in sales, usage or trial of a product or service (i.e. initiatives that are not covered by the other elements of the marketing communications or promotions mix). Sales promotions are varied. Often they are original and creative, and hence a comprehensive list of all available techniques is virtually impossible (since original sales promotions are launched daily!)
Idris (2008) explained that Sales promotion is one of the eight aspects of the promotional mix. The other seven promotools are:
- Personal selling
- Public Relations
- Direct Marketing
- Point of Sales Display
Robin (2000) states that Sales Promotion tools offer three distinctive benefits:
- Communication: They gain attention and may lead the consumer to the product.
- Incentive: They incorporate some concession, inducement, or contribution that gives value to the consumer.
- Invitation: They include a distinct invitation to engage in the transaction now.
Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial, whereas a free management-advisory service aims at cementing a long term relationship with a retailer. Sellers use incentive-type promotions to attract new triers, to reward loyal customers, and to increase the purchase rates of occasional users. Sales promotion often attracts brand switchers, who are primarily looking for low price, good value, or premiums. Sales promotions generally are unlikely to turn them into loyal users, although they may be induced to make some subsequent purchases. In markets of high brand dissimilarity, sales promotion may be able to alter market shares permanently but in market of high brand similarity sales promotions can produce a high sales response in the short run but little permanent gain in the market share.
In addition to brand switching, consumers may engage in stockpiling – purchasing earlier than usual (purchase acceleration) or purchasing extra quantities.
Sales promotions can be directed at, the customer, sales staff, or distribution channel members (such as retailers). Sales promotions targeted at the consumers are called consumer sales promotions. Sales promotions targeted at retailers and wholesalers are called trade sales promotions.
A number of sales promotion benefits flow to manufacturers and consumers. Sales promotions enable manufacturers to adjust to short – term variations in supply and demand. They enable manufacturers to test how high a list price they can charge, because they always discount it. They induce consumers to try new products instead of never straying from current ones. For retailers, promotions may increase sales of complementary categories (cake mix promotion may help to drive frosting sales) as well as induce some store-switching by consumers. They promote greater consumer awareness of prices. They permit manufacturers to sell more than they would normally sell at the list price. Consumers themselves enjoy some satisfaction from being smart shoppers when they take advantage of price specials.
1.1 Statement of the Research Problem
In this era of keen competition among producers, William (1999) observed that sales promotion has to be called upon, not only to highlight each company’s advantage but also to increase the number of sales and customers. He also observed that manufacturers have argued over the years that there is no real or tangible benefit derived from sales promo. They complained that it is a waste of time and resources and that “sales don’t get actually promoted”
It is on this premise that this research work wants to investigate the fact that sales promotion is considered as a mere waste of money and not a tool that increases product competitiveness.
1.2 Relevant Research Questions
In order to achieve the purpose of this study, key research questions that were formulated include the following:
- What is the impact of sales promotion on consumers’ brand preference?
- How does sales promotion impact on a product’s competitiveness?
- Do consumers buy more of a product during sales promotion?
- What are the common types of sales promotion known to the consumers?
1.3 Statement of Hypotheses
- Sales promotion impacts on a consumer’s brand preference and at such increase a product’s competitiveness.
- People buy more of a product during sales promotions.
1.4 Purpose and Objectives of the Study
Following from discussion under the background to this project work, it is clear that this research workaims at analysing the strength of sales promotion and its impact on product competitiveness.
We shall analyse and examine the impact of sales promotion on the sales of fast moving consumer goods (FMCG) with particular interest on Dansa Foods Limited.
The FMCG Industry is getting more competitive by the day; new companies are making grand entrance by the day and cutting into each other’s target market. Different companies have had to come up with “better products”, better offers, better pricing all in the bid to sway customers and increase their bottom line.
The purpose of the study is to investigate the impact or otherwise of Sales Promotion on product competitiveness in the fast moving consumer goods (FMCG) sub sector. In doing this, the following are the specific objectives to be achieved by the study:
- To distinguish between Sales Promotional activities and other promotional activities (or promotools)
- To briefly examine the different Sales Promotional techniques
- To examine the need for sales promotion as an effective promotool
- To examine the impact of sales promotion on the competitiveness of fast moving consumer goods.
1.5 Scope of the Study
Every organisation has its own unique ways of combating in this keen competition era. Of course there are various methods of getting the attention and retaining the loyalty of the target audience, this study will however limit itself to the option tenable in sales promotional activities.
This study will extensively look at the impact of well planned, customer inspired, well researched, corporate goals motivated activities all tailored to satisfy the needs of the heterogeneous consumers.
The scope of this research work will be strictly concerned with the sales promotional activities of Dansa Foods Limited particularly those directed at the Juice category.
1.6 Limitation of the Study
Obtaining all relevant data in most research work is usually met with a number of limitations; this exercise is no exception owing to its scope and nature.
The first limiting factor is time; there wasn’t enough time to carry out a long elaborate research, hence this research focused on promotional activities during a particular period of time. It considered a six months period from 1st of December, 2008 to 30th of May, 2009.
As earlier stated, there are various expressions of consumer sales promotion, it will be tedious to consider all these types, this research therefore focused on two popular types; namely
- Free gift
- Buy-One-Get-One-Free (BOGOF )
It will also be cumbersome to sample the opinions of all customers of Dansa Fruit Juices; we therefore restricted the research to consumers in the city of Lagos.
1.7 Operational Definition of Terms
In the course of this study, various terms were used as appropriately as possible. Following are a glossary of some of such terms: ·
The group of actual or potential buyers for a product. ·
Promotion / Promo tools:
It involves all set of organizational activities involved in the process of making a product or service available for use. Fred (2003) explains it as everything that is done to help sell a product or service in every step of the sales chain, from the presentation materials a sales person uses during a sales call to the television commercial that tries to get the customer to think favourably about what is being offered. ·
Duncan (2002) describes Sales Promotion as the marketing communication function that encourages action by adding tangible value to a brand offering, it is usually short term aimed at encouraging and accelerating response. ·
The powerful effect that something has on somebody or something
Fast Moving Consumer Goods (FMCG):
These are products that have a quick shelve turnover, at relatively low cost and don’t require a lot of thought, time and financial investment to purchase. It refers to a wide range of frequently purchased consumer products including toiletries, soaps, packaged food/edibles, drinks etc.
This is the edge or preference that a particular product enjoys above other products in its category.
Kotler & Keller (2008) describes this as the process by which consumers select, organize and interpret information to suit individual behaviour. It depends not only on the physical stimuli but also on the stimuli’s relationship to its surrounding field and on conditions within each of us.
This is a consumer’s preference for a particular product which always ensures repeat purchases. It is the assurance that no matter what happens, a consumer is “faithful” to a chosen brand.
Kotler & Keller (2008) defines brand as a name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.
“any paid form of non-personal presentation and promotion of ideas, goods or services by an identifiable sponsor”.
This is the oral presentation usually in a conversation or discussion format of goods, services or ideas to a prospective buyer by an agent usually called the “Sales Representative”
This is the non-personal stimulation of demand for products, services or businesses by planning commercially significant news about such in a published medium like Newspaper, Magazine, Television, Radio etc. This usually gives the product or service a favourable coverage to the entire public. It doesn’t necessarily need to have an identifiable sponsor.
According to Jeffkins (1996), Public Relations can be referred to as “all form of planned communication, outward and inward between an organization and its public (internal and external) for the purpose of mutual understanding”. Another author defined it as the planned effort to influence opinion through social performance based on mutually satisfactory 2-way communication.
Summary of Findings, Conclusion and Recommendation
5.1 Summary of Findings
The purpose of this study is to elicit information about the impact of sales promotion on products’ competitiveness with special reference to Dansa Foods Limited, makers of Dansa Fruit Juices. The following are the major findings discovered in the course of this research work:
- Sales Promotion encourages consumers to buy more of the product on offer
- It also encourages brand switching; it is enough reasons for a large percentage of consumers to change to another brand. Hence, sales promotion does not build brand loyalty as consumers are on the lookout for other offers from competition.
Based on the data collected and the various types of literature that was reviewed during this research it is obvious that Dansa Foods Limited partake in a lot of sales promotional activities.
The sales promotion of these products therefore constitutes a considerable part of their promotional expenditures.
In conclusion, sales promotion is a principal selling strategy and a brother to all other marketing components.
Having analyzed, discussed and interpreted the collected data from the field survey, the researcher recommends the following:
- Since sales promotion is impactful on products’ competitiveness, it is necessary, therefore, for Dansa Foods Limited to invest more on promotional activities. Also, other forms like price off, coupon, discount etc, could be introduced into their sales promotional activities.
- The sales and marketing executives should be given thorough orientation about their company, its products, visions and activities. These will surely enhance their skill of handling consumer’s objections and questions.
- The company should ensure that the customer’s participation is not strenuous; this is to avoid discouragement on the consumer’s part.
- Also, considering the potential market among students of tertiary institutions, it is recommended that the management should embark on a promotional campaign specifically directed to this group of people. With proper analysis, the campaign would be a huge success.
- Lastly, firms cannot carry out sales promotional analysis, planning, implementation and control without researching into consumers’ needs, competitors activities etc. It is therefore recommendable that more findings should be carried out for these programmes.
5.4 Suggestions for Further Studies
In the course of the study, it was discovered that in as much as Sales Promotion impacts on a consumer’s choice at the point of purchase, other aspects of the promo-tools also contribute their own quota to the final decision made.
The impact of these other activities such as packaging, personal selling, sponsorships, point of sales display, advertising etc at the same time with sales promotion renders the understanding of the full impact of sales promotion in isolation almost impossible. It is therefore necessary in further studies that an analysis of the impact of other promotools be measured.
It is also suggested that sales promotion impact be measured not only from the consumers point of view (as done here) but also from the organizations’ point of view. A study of this nature will measure the sales promotion budget viz-a-viz the profit generated over the period of the offer.
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